Tianqi Lithium’s purchase of SQM shares would make Chinese firm world’s largest producer of lithium

China’s Tianqi Lithium Corp. has bought nearly a quarter of the shares of Chilean lithium producer Sociedad Quimica y Minera (SQM), the world’s largest lithium producer, for USD 4.1 billion. Tianqi Lithium bought 62.5 million SQM A shares for USD 65 each from Canadian fertilizer company, Nutrien Ltd.

The sale, if approved, would give Tianqi Lithium Corp. close to a controlling stake in SQM, giving the Chinese company access to a key ingredient in rechargeable batteries used in mobile phones and electric cars.

The deal would need the approval of Chile’s anti-trust regulator, the National Economic Prosecutor’s Office (Fiscalía Nacional Económica or FNE). Once approved, Tianqi Lithium will control the equivalent of 46% of the world’s 2017 ore output, through the combination of its 51% stake in Greenbushes lithium mine in Western Australia, and its interest in SQM’s project in the Atacama Desert in Chile.

Tianqi Lithium is a leading global supplier of lithium products, with major businesses in lithium resource development, exploration and downstream lithium refining.

Tianqi Lithium’s interest comes as China aggressively pursues electric vehicles to combat air pollution, especially in urban areas of the country.  Officials from China’s Ministry of Industry and Information Technology expect automakers in China to produce seven million electric and hybrid vehicles annually by 2025. Last year, China emerged as the leading EV market in the world, with BYD and BAIC becoming number one and number two EV manufacturers.

Based in Chengdu, Sichuan Province, Tianqi Lithium received the status of a China High-tech Enterprise, National Hi-tech Industrialization Base for Magnesium & Lithium Material, Sichuan Post-doctoral Innovation Practice Base, Sichuan Innovation-based Pilot Enterprise and Sichuan Fostered Enterprise with Intellectual Property Advantage, among other noteworthy distinctions.

Chile’s former government in March filed a complaint with the FNE to block the share sale to Tianqi Lithium, which could give China an upper hand in the global race to secure resources for electric vehicles.

The FNE regulator has until August, with the possibility of extensions, to decide whether to launch a full investigation into the case.

Nutrien Chief Executive Chuck Magro has said that he was confident the deal would be completed by the fourth quarter.

Corfo, the Chilean agency that filed the complaint to block the sale of the stake to Tianqi Lithium, said in a statement it was awaiting the FNE’s decision and would cooperate in its investigation.

The 24% stake sale is necessary for Nutrien to meet regulatory commitments after it was formed in January by the merger of Agrium and Potash Corp. of Saskatchewan, Canada.

Nutrien said it plans to use proceeds from the sale of its 24% stake in SQM and two other companies to expand its network of farm retail stores in the United States, and to establish a network in Brazil.

Nutrien plans to sell its remaining 20.2 million B shares of SQM, which represents a nearly 8% stake in the company in the future.